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the new world of online advertising.

Banners and skyscrapers. Pop-ups and pop-unders. Interstitials and super-stitials. Such is the polysyllabic argot from the brave new world of online advertising. Just when you’d gotten used to the ubiquitous banner ad running across the top of your computer screen, new ad forms are popping up, popping under, blinking, whooshing, and swooshing across a Web page near you. All are vying for your attention and your dollars, but most readers have a mixed relationship with advertising. Online advertising is like the movie villains you love to hate: They aren’t the heroes, but without them there’s no story.

“We need a way to pay our bandwidth bills,” says Jeff “Hemos” Bates, cofounder of technology news site Slashdot.org. “Bandwidth isn’t powered by eclairs and moonbeams.”

Enter advertising.

Still in the game

In the wake of the economic recession and dot-com fallout, online advertising has taken a beating, but it’s still swinging. “The market is still growing, it’s just not breakneck growth,” says Walter Janowski, research director at analyst firm GartnerGroup. “A good portion of online advertising revenue was being driven by dot-coms.”

With the dot-com money gone, online advertising has suffered. That’s the bad news. The good news is that online advertising is holding up well compared to other advertising channels in these lean economic times. According to the Interactive Advertising Bureau, online advertising hasn’t been caught in the general ad decline that’s plagued other media lately. Janowski says the total market for online advertising stands at $7.9 billion today, and he expects it to grow to $18.8 billion by 2005.

What we have seen in the online ad market is a strategy shift away from smaller, more targeted sites toward larger, mass-media sites. So while the online ad market has grown despite general advertising weakness in other media, the winners are the top 50 sites. It is increasingly difficult to get people to advertise on boutique sites.

The workhorse of online advertising is the staid banner ad, an image running nearly the width of a Web page and an inch or so down the page. It’s a familiar stripe of advertising, positioned at the top of innumerable Web pages, but that familiarity might be its weakness as well as its strength. While the banner ad is used most commonly–analyst firm International Data Corp. (IDC) Research Manager Jonathan Gaw says one-third of online advertising budgets goes to banner ads–it also suffers considerable scorn.

“User studies four years ago showed that people tune banner ads out. Look at the click-through rates,” says Jakob Nielsen, usability expert and author. “[A banner is] a zombie–the walking dead.” Click-through is industry shorthand for the rate of users who actually click on an ad. The click-through rates of banner ads have suffered, giving birth to more sophisticated advertising types–typically called rich-media advertising in the parlance of the profession.

New forms for old ideas

In the search for more effective ads, simple variables are being explored. You can take an ad and change its shape, or its location, or both. The skyscraper is becoming a familiar format–it’s essentially a banner ad turned on end and pushed to the right side of your screen. Also, a wider variety of square button shapes are popping up, as are large, rectangular ads. One ad, commonly called a CNet unit, is a large rectangle placed in the middle of a page–it was named after its originator, the online content site CNet. “It’s their brand of Kleenex,” says Andi Poch, the vice president of national sales at DoubleClick media in New York City.

While banner ads are the steak in online advertising, rich media is the sizzle. Beyond varying the shapes and placement of ads, the catch-all category of rich-media advertising uses combinations of JavaScript, dynamic HTML, and downloadable software components to get users’ attention with interactivity, animation, and multimedia. Automatically opened windows, dynamic graphics that scoot across a page, sound clips, interactive games, and transitional full-screen Web pages all fall under the rich-media heading. Innovation in this area grows daily, and there are only rough standards. The Interactive Advertising Bureau offers some basic guidelines for ad size, download size, error checking, and the like, but this is the Wild West of advertising space.

The good, the bad, and the ugly

Almost no one claims that online advertising doesn’t work at all, but opinions vary about what constitutes success. The uncontested baseline for the industry, though, remains the banner ad. But according to IDC’s Gaw, the banner ad’s days are numbered. “The percentage going to banners will diminish,” says Gaw.

The effectiveness of banner ads is fiercely debated among user interface experts, advertising professionals, and industry analysts. “Banner ads were novel in 1995,” says Nielsen. But they are now passé, he insists.

Some claim that banners are simply ineffective, but others say the problem lies more in implementation. “I can create a banner-ad campaign that gives you an 11 percent click-through rate,” says Slashdot’s Bates. He believes the problem is that people are unwilling to go to the effort to craft effective ads and keep them updated. “The industry is not even teething, it’s so young.”

Some argue that click-throughs are not an effective metric because of more fundamental issues. “Click-through rates are not the only measurement tool,” says DoubleClick’s Poch. “Online advertising is part of a branding campaign.” She claims that click-through rates fail to reflect a more important metric–brand awareness. The subtle or not-so-subtle insinuation of a brand into the consumer’s consciousness isn’t necessarily reflected by whether or not they clicked on an ad. “There’s a trend away from measuring click-through rates and trying to address the ad objectives and meet those goals,” Poch says.

Gaw points out an example of this branding phenomenon at work. You may never have clicked on an online ad in your life, but there’s a good chance you’ve heard of a certain wireless X10 camera thanks to the company’s frequent use of pop-under ads.

Online disconnect

A curious aspect of the failures in online advertising is that while many of the above statements are considered common knowledge in the industry, seldom are they implemented. Indeed, there is a disconnect between conventional wisdom and advertising practice.

Some feel the blame for this falls on the shoulders of advertisers. Banner exchange networks combined with cheap advertising and affinity programs lead some companies toward a cluster-bomb approach to advertising rather than a relevant targeted ad. “This has the effect of producing an environment where the user was continuously interrupted by entirely non-relevant ads,” says Robert Bloch, an editor for the business news publication Dotcomscoop.com. “It is hardly surprising that people learn to switch off.”

“People ignore blinking graphics,” says Nielsen. “They’re useless.” Designers claim that over time, people learn to ignore advertisements, blinking or not. According to Kim Ladin, director of information architecture at San Francisco-based Internet design agency HotStudio, people develop what she calls banner blindness. “We’ve recognized this fact for some time, but people have trouble acting on it,” she says.

Similarly, users actively fight pop-up ads, often closing them before they can load. “Pop-ups are a joke,” says Ladin. “They take control away from the user,” which violates a fundamental law of what makes a good computer interface.

“Certain forms of advertising are doing a serious amount of damage to the long-term marketing prospects for this medium,” says Bloch. “You wouldn’t see the equivalent of pop-ups on television, because advertisers have realized that viewers need to be engaged rather than simply interrupted.”

The effects of users tuning out ads is so profound that Web designers run the risk of encouraging surfers to ignore interface elements if they’re too similar to those in an ad. “You have to be careful to make sure nothing [in your content presentation] looks like an ad,” says Ladin. People are also suffering from ad overload, with too many advertisements on a single page. At a certain point, ads get in the way of the task a user is trying to perform, which risks user alienation.

“Degrade the user experience and users will eventually say, ‘enough,'” says Nielsen.

Adding value

Effective online advertising ends up being more about working with the user’s expectations and less about size and placement. “Advertisers are fighting the basic nature of the medium,” says Nielsen. According to Nielsen, a good example of properly using the medium is implementing searchable classified ads. He also sees great potential in keyword-based ads that appear on search-engine Web pages based on the key word a user types in. “The advertiser has a solution for what you personally are looking for–that’s very different from a targeted ad based on demographics,” says Nielsen.

According to Bates, advertisers need to limit the number of ads. “When you go to a page and there are nine different ads across the page, advertisers shouldn’t tolerate it,” says Bates. There should be one ad per page to give Web surfers a chance to absorb an advertiser’s message. “You don’t see four different ads playing on TV at the same time,” she adds.

“Reduce visual noise,” concurs Ladin. “Put more attention toward carefully planned ads.”

According to experts, the most important thing is staying out of the way of a user’s aims. “Put things in context of the task, and frame the ad in terms of being helpful, instead of a slick come-on,” says Ladin. “If a publication consistently presents advertising that is relevant to its audience, users will become far more willing to participate in the marketing experience,” says Bloch.

Ad futures

Online advertising is here to stay. It’s simply a question of form and who’ll be running the show. Bates sees a lucrative future for sponsorships. He predicts a flurry of sponsored newsletters distributed electronically. “People will pay to receive these newsletters, like they did in the ’80s,” he says.

According to Nielsen, the future of the medium is in providing highly targeted solutions to a user who’s defined a very specific problem. Nielsen calls it request marketing, a step beyond permission marketing. In his vision, a user will define what he wants. When a company can provide a solution based on those parameters, the user will receive an advertisement. This will not be “big generic brand advertising,” but rather a highly individualized pitch, according to Nielsen.

Gartner’s Janowski also sees company consolidation on the horizon. He describes the three players as the advertisers, the publishers, and such “go-betweens” as DoubleClick Media. “The go-between role will be absorbed into the publishers or the traditional ad agencies,” he says.

Advertising is a paradoxical art. A good ad seizes your attention, but it can cross an invisible line and become intrusive or offensive, souring a potential consumer. “We’re still trying to strike a balance between effective and intrusive,” says IDC’s Gaw. “What’s acceptable hasn’t been decided yet.”

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